In May of last year, New York City residential brokerage Douglas Elliman revealed its business was at a crossroads.
“Douglas Elliman began to experience a severe decline in closed sales volume in mid-March 2020 and this continued in April and May,” read a Securities and Exchange Commission filing by Elliman’s parent company, Vector Group (Vector Group’s largest brand is cigarette manufacturer Liggett Group). “Beginning in April 2020, we made significant operating adjustments at Douglas Elliman, including a reduction of staff by approximately 25% and a reduction of all other salaries by approximately 15%. In addition, we are consolidating some office locations and are in discussions with our landlords regarding rent reductions, deferrals and holidays.”
Fast forward to today and Elliman is pitching itself as a brokerage that can compete in a market of higher agent commission splits and lower overhead. Last week the brokerage named Scott Durkin to replace Dottie Herman, who spent 17 years as firm CEO.
Durkin previously served as president and chief operating officer of Elliman. Howard Lorber, the brokerage’s longtime executive chairman, singled Durkin out for “his truly incredible performance helming the brokerage during the extremely challenging covid-19 pandemic.”
Durkin joined Elliman after 25 years at the Corcoran Group, a New York City brokerage that is part of the Realogy conglomeration. He is now leading a brokerage that made a $14 million profit in the first quarter and generated $272 million in revenue after paying agents their commission split and other expenses. Compare this to the first three months of 2020, when Elliman lost $69 million and produced $165 million in revenue.
Can the positive financial results last? And where does this Manhattan outfit — one whose clients typically own multiple homes — fit into the national brokerage ecosystem? HousingWire spoke with Durkin on the phone this week about such topics, and here’s an edited version of that conversation:
HousingWire: In the press release announcing your elevation to CEO, you mention advancing Douglas Elliman’s technology-focused initiatives to let agents work faster and more efficiently. What are those initiatives?
Scott Durkin: There’s an internal portal, My Douglas, and within that portal there are other software systems agents use to help drive their business.
There’s also CRM (customer-relationship management) that helps drive agent’s business. And Elliman Concierge, which is software that takes buyers from the accepted offer to closing and beyond. There are movers, services for utilities, design, decorating, everything is in there. There’s Humming Homes, which is software where homeowners manage property.
HW: Did Elliman develop this software internally or acquire it?
Durkin: It’s acquired. We are not a technology company. We sell real estate.
HW: It must be expensive keeping up with brokerages (Compass and Keller Williams are two examples) that bill themselves as partly technology companies.
Durkin: Yes, it’s a very expensive part of our business. It costs several millions of dollars monthly. But it’s giving our agents tools to help them do their business.
And the digital piece of our business was brought forward much faster than we expected. Covid really accelerated everything. That was the silver lining.
HW: You’ve described agents being able to do their job digitally now. Does that remove the necessity of offices?
Durkin: That’s one of the top topics we talk about here — the brick-and-mortar footprint of the company. We were able to shave off 11 offices across the country out of 121.
Working remotely has led to a better family life, better personal life for agents.
HW: Talk about the growth of Douglas Elliman and your typical client.
Durkin: We started in Manhattan and Long Island, and we have places like Aspen, Colorado. We are operating and expanding where our clients have second or third homes. Our average home price is $1.6 million.
For us, our next openings will be in Sarasota and Naples, Florida, and then perhaps San Francisco, California, and Scottsdale, Arizona. We keep an eye on where our client is going.
As the buyer is high-end, so is the agent. There are lifelong relationships where the agent becomes part of the business side of a family. There are so many things the agent does for the client that goes outside the business piece of the deal. It could be staging the entire house.
HW: What is the relationship between Elliman and your parent company, the Vector Group?
Durkin: They are our 30,000-foot-high spaceship that keeps an eye on us. Many subsidiaries feel they never get to know their parent company. But we speak several times a week, and there are very involved in real estate. Their New Valley Ventures arm is investing in prop tech. It’s a very fluid and active relationship.
HW: Does Elliman do anything different because you’re a subsidiary?
Durkin: No, we would not have done anything differently. I came from a much bigger company, and it’s much different here. There are no layers. We all reach out to each other.
I was fearful that they were a corporation that would squeeze the profits out of us and not let us reinvest in the company. But it’s not been like that at all.
HW: Elliman made a profit in the first quarter, but it’s a housing boom. How can your business at least partly transcend housing cycles?
Durkin: One item is that technology has allowed us to shrink our employee count and offices. It really helped our bottom line. Even if the housing market cools off, we are much leaner. That was a wonderful outcome for us.
HW: How many employees did you lay off?
Durkin: It was about 30% [of the company largely] due to technology and centralization. It was something that had to happen — we just had to enact our contingency plan.
But it’s been really good for the company and really good for the industry. It’s given us a chance to see how we want to grow and areas that don’t make sense for the company and the brand.
HW: Who are your competitors?
Durkin: It really depends on the market. There’s Sotheby’s [International Realty] and sometimes Compass. And in Florida there’s more independent brands.
HW: Compass has enticed agents from Elliman and other brokerages by offering more favorable agent commission splits. Have you had to significantly revise what part of the commission agents receive to compete?
Durkin: You’ll make more money under our brand. Has there been commission erosion? I’m sure there has. But we don’t recruit that way. You can’t recruit someone who is just concerned by the commission. Many of those people are coming back because it’s hard to have a fixed marriage like that. Great leadership will help them get back to home base.
